A month has gone by since the last earnings report for JB Hunt (JBHT). Shares have lost about 9% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is JB Hunt due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Earnings Miss at J.B. Hunt in Q3
J.B. Hunt's earnings of $1.18 per share fell short of the Zacks Consensus Estimate of $1.26. Moreover, the bottom line declined 15.7% year over year due to the disappointing performance of its JBI unit. Total operating revenues increased 4.6% to $2,472.5 million. Revenues also beat the consensus mark of $2,345.2 million.
Total operating revenues, excluding fuel surcharge revenues, grew 9% year over year. The top line was driven by a 25% increase in revenue per load in ICS, 34% improvement in the number of stops in FMS, 9% rise in loads in DCS and 14% growth in loads in JBT.
Both quarterly operating income (on a reported basis) and operating expenses rose 5% and 4.6% on a year over year basis, respectively.
The JBI division generated quarterly revenues of $1.2 billion, down 2% year over year. Even though segmental volumes grew 2%, volumes in the quarter were heavily constrained by rail congestion and service issues. Moreover, operating income grew 22% to $108.4 million.
Revenues at the DCS segment inched up 1% year over year to $553 million. Moreover, operating income rose 5% year over year to $80.4 million owing to increased productivity of assets, reduced driver turnover, fewer start-up costs, lower travel and entertainment expenses.
ICS revenues increased 28% year over year to $431 million owing to higher contractual and spot rates compared to the third quarter of 2019. Moreover, revenue per load grew 25%. The segment’s operating loss in the quarter widened year over year to $18.3 million.
FMS revenues increased 22% to $182 million since stop count within the segment improved 34% during the September quarter. The segment’s operating income rose 13% year over year, driven by an increase in revenues from both the December 2019 acquisition and the addition of multiple customer contracts throughout 2020.
JBT revenues were up 16% to $109 million, primarily due to a 14% increase in load count. At the end of the third quarter, total tractors were 1,713 (of which 800 were company-owned) compared with 1,896 in the year-ago period. Meanwhile, operating income plunged 55% to $2.9 million due to escalated costs pertaining to purchased transportation and increased investments in technology, among other factors.
Liquidity & Buybacks
The company exited the third quarter with cash and cash equivalents of $318.5 million compared with $35 million at the end of 2019. Long-term debt was $1.3 billion compared with $1.29 billion at 2019-end. Net capital expenditures in the first nine months of 2020 were $448.7 million compared with $586.6 million in the first nine months of 2019.
During the reported quarter, J.B. Hunt did not buy back any shares. The company had approximately $520 million remaining under its share repurchase authorization at the end of the third quarter.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -8.35% due to these changes.
At this time, JB Hunt has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, JB Hunt has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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